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March 2018

Catalyst For Change? Is the Construction Industry Fit for Purpose?

Catalyst For Change? Is the Construction Industry Fit for Purpose?

Build UK, an organisation that represents 40% of the construction sector is looking to learn lessons from the demise of Carillion and is trying to lead a wholesale change in the way that the industry operates, to bring about an industry that is fairer, more efficient and ultimately more profitable. And these views have been echoed by North Midland boss, John Homer.

Describing the construction industry as “not fit for purpose”, Build UK cites the combination of lowest price, inequitable transfer of contract risk, poor payment practices and inadequate governance as factors that need addressing. Contractors and sub-contractors too often work in conflict, whereas collaboration right across the construction supply chain is needed. Build UK advocate changing the commercial model that currently operates to change the industry from one of mediocrity to one that realises its potential to be truly world class.

North Midland Construction Group Chief Executive, John Homer calls for the removal of retentions, the speeding up of payments to subcontractors and a fundamental change in culture within the construction industry.

We agree that change is long overdue and, whilst we applaud and totally support the aims of Build UK and contractors like North Midland, unless and until there is a fundamental shift within those managing individual jobs, nothing is likely to change. Too often bringing a contract in on budget, at any cost, is the overriding motivator that brings contractors into conflict with their sub-contractors. Costs do overrun, it’s all part of the complex and lengthy construction process. It’s a fact. But those costs and delays should not be automatically put at the door of the subcontractor, especially where the subbie has acted in good faith and fulfilled his part of the contract. Regrettably, the performance of management (quite often quantity surveyors) in our opinion, is regularly measured by bringing a project in on or under budget and deflecting many quite valid claims made by the subbie.

The financial strength, or in Carillion’s case its “apparent strength”, and dogged determination to delay, or totally avoid payment is not unusual, even amongst some of Build UK’s members. Using every legal trick in the book to deter a sub-contractor from bringing claims, or in some cases actually putting the subbie out of business have become common place. Large contractors have deep pockets, which most sub-contractors could never hope to match and so many give up before getting their day in court.

It is this mentality, often driven from the top, that must change. And when large contractors realise that working towards the aims of Build UK is likely to have an adverse effect on their bottom lines, we wonder how successful the initiative might prove to be. Investors expect profits, or the share price suffers. Sub-contractors are shareholders and investors too and these are usually one and the same individuals as the directors and employees. If they don’t make profits, they quickly go out of business. Let’s hope that the drive for fairness and long-term success is recognised by the investors and management of main contractors, in the same way as it will be by the small sub-contractor.

We need change, but the task Build UK is setting itself will require systemic change across the construction industry.